HOW DO SUBSIDIARIES CONFRONT INSTITUTIONAL DUALITY?

IDENTITY
CLAIMS AT HINDUSTAN LEVER 1961 -2009

ANIRVAN PANT
INDIAN INSTITUTE OF MANAGEMENT BANGALORE
D-101, Office Blocks, IIM Bangalore campus
Bannerghatta Road, Bangalore, INDIA – 560076

J RAMACHANDRAN
INDIAN INSTITUTE OF MANAGEMENT BANGALORE

INTRODUCTION

The elegance of the integration-responsiveness framework - a core element of

international management discourse for nearly three decades - lies in its ability to capture the
complexity of the multinational corporation’s (MNC’s) strategic and organizational challenges in
a parsimonious manner (Bartlett and Ghoshal, 2002). Our aim is to position the subsidiary at the
heart of the integration-responsiveness tension and to develop a theoretical understanding of how
the subsidiary is able to confront this tension. We argue that, on account of institutional duality,
the integration-responsiveness tension at the level of the global headquarters gets transformed,
we argue, into an incessant ‘nation responsiveness-corporation responsiveness’ tension at the
subsidiary level.
For the multinational subsidiary, born of and seeking legitimacy from both the parent
corporation and the host country, the nation responsiveness-corporation responsiveness tension is
embedded into its identity. Therefore, the research question we engage with in this essay is: How
does the subsidiary management employ organizational identity as a device to navigate the
nation responsiveness-corporation responsiveness tension confronted by the subsidiary?
Our research setting for studying this question is Hindustan Lever Ltd. (renamed
Hindustan Unilever Ltd. in 2007) – the Indian subsidiary of Unilever Inc. – one of the world’s
leading multinational enterprises in fast moving consumer goods. Using qualitative procedures
and grounded theoretic techniques, we study the evolution of identity claims made by the
subsidiary management over a forty-nine year period at Hindustan Lever. In doing so, we seek to
understand how the management of identity claims and the management of the nation
responsiveness-corporation responsiveness tension are interlinked. Our findings lead us to
propose a process model of subsidiary identity management.

THE INTEGRATION-RESPONSIVENESS TENSION

The integration-responsiveness tension emerges from the framework provided by Doz,

Bartlett and Prahalad (1981: 63) where they described how the MNC drive towards “international
competitive advantage through global rationalization of advantage is tempered by the needs and
wishes of host nations and the diverse demands of their markets.” Consequently, they argued,
managerial decision making in MNCs needs to reconcile conflicting demands for local
responsiveness and global integration. Global integration enables the MNC to manage its operations
as a unitary efficient entity with streamlined processes and consistent product offerings. Local
responsiveness emerges from the attempts of the MNC to meet the demands of local authorities in
host countries and to adapt the product offerings of the MNC to the tastes and peculiarities of the
local market. However, “since national responsiveness often can be achieved only at the expense of
global consistency and clarity, tensions can be created” (Doz et al., 1981: 64). Moreover, strategic
choices at a given point of time can hardly resolve these tensions once and for all.

A Subsidiary Perspective

In order to survive and grow in the host country, subsidiaries try to behave, at least in part,
like other local enterprises. In doing so, they come to reflect the values, norms and cultural practices
peculiar to the social context in which they operate (Rosenzweig and Singh, 1991). However, their
ability and even their aspiration to ‘go native’ gets tempered by the administrative heritage endowed
by the MNC organization and the hierarchical control exercised by the parent corporation
(Rosenzweig and Singh, 1991). Consequently, every multinational subsidiary exhibits, in the words
of Raymond Vernon (1977), ‘the elements of a double personality.’ In effect, the subsidiary
confronts twin isomorphic pressures, i.e., institutional pressures to conform emanating from the
MNC organization (the internal environment) and those emanating from the host country institutional
environment (the external environment) (Kostova and Zaheer, 1999). The subsidiary’s need to
acquire and maintain its legitimacy in both the internal and the external environments creates the
condition of institutional duality (Hillman and Wan, 2005; Kostova and Roth, 2002).
In other words, when the integration-responsiveness tension percolates down to the level of
the subsidiary, the nature of the tension undergoes a transformation. This is so because in the case of
the subsidiary, the MNC organization itself constitutes an ‘environment’ seeking responsiveness
from the subsidiary. We propose, therefore, that the subsidiary confronts a ‘nation responsiveness–
corporation responsiveness’ (NR-CR) tension. Managing this tension is hardly a trivial challenge. As
Vernon (1981: 523) noted, the subsidiary can never really ‘respond single mindedly’ to the interests
of the national environment because the interests of the MNC are essentially cross-national.

Organizational Identity

Recent research in international management suggests that organizational identification plays

a key role in determining how subsidiaries navigate the problem of institutional duality (Kostova and
Roth, 2002). Tripsas (2009: 444) observes that “organizational identity serves a coordinating role,
providing a focal point for both insiders and outsiders about what constitutes legitimate action on the
part of an organization. As such, identity guides the development of capabilities, the acquisition of
knowledge, the evolution of routines, and the framing of issues”. As we examine the subsidiary’s
strategic choices at key junctures, organizational identity could provide theoretical clues into the
antecedents (why was a given strategic option out of the potentially several chosen?) as well as the
consequences (what was the impact upon the organization’s goals and objectives?) of the said choice.
Thus, for the researcher seeking to understand how the subsidiary navigates through the NR-CR
tension, the concept of organizational identity provides a powerful theoretical lens.
Organizational identity resides in the self-referential meaning emerging in response to
questions such as, “who are we as an organization?”, “what business are we in?”, “who do we want
to be as an organization?” in relation to larger contexts of cultural meaning (Albert and Whetten,
1985; Corley and Gioia, 2004; Corley et al., 2006). Organizations, unlike individuals, can possess
multiple identities “without appearing hopelessly fragmented or ludicrously schizophrenic, as an
individual might” (Gioia, 1998: 21). A specialized case of multiple identities is hybrid identity where
the distinctive identities intertwine so as to lend themselves to a new, synthesized. A hybrid identity
would typically correspond to the synthesis of twin, fully articulated identities in an organization
where one would not normally expect the twin identities to go together (Albert and Whetten, 1985;
Corley et al, 2006). Albert and Adams (2002) stipulate that hybrid identities are specifically those
that are viewed by the organization as simultaneously inviolate (neither can be compromised),
incompatible (the juxtaposition is conflict-ridden, by definition), and indispensable (neither can be
dropped). In this paper, in keeping with the subsidiary’s compulsion to respond to headquarter
imperatives as well as host country demands, we conceptualize the subsidiary as having a hybrid
identity – an identity framed by the synthesis of two, distinct and often opposing identities - a parent
corporation identity and a host country identity - which are simultaneously inviolate, incompatible,
and yet indispensable.
Following Ravasi and Schultz (2006), we view the two perspectives on organizational
identity as complementary. We adopt a view of multinational subsidiaries as social actors while
borrowing from the social constructionist perspective to allow them agency in managing their
identities over time. Given the long span of time covered by our study, a social actor view of
subsidiaries enables us to focus on the changing character of their identity claims (‘sensegiving’) – as
collective actors - in response to an ongoing NR-CR tension, while setting aside the actual process of
emergence of identity change within the organization (‘sensemaking’). At the same time, the concept
of institutional duality suggests that subsidiaries seek to conform to the stronger institutional pressure
emanating from either the MNC organizational environment or the host country environment.
Therefore, we view identity as malleable and ever-shifting – a view more in consonance with the
social constructionist perspective than with the social actor perspective.

METHODS

We chose Hindustan Lever as the research site for our study for two reasons. First,
Hindustan Lever’s long history as a large and profitable multinational subsidiary that was well-
regarded in the host country brought it to our attention. Second, Hindustan Lever is listed separately
on an Indian stock exchange. This implies that, in addition to the responsibilities towards Unilever’s
shareholders, the subsidiary had a separate responsibility to their Indian shareholders. These are twin
responsibilities for the subsidiary that may be potentially mutually conflicting. This suggested that
Hindustan Lever may have faced a heightened form of the NR-CR tension.

Data and Analysis

The Chairman’s annual speech to shareholders of Hindustan Lever is our principal data.
We analyzed transcripts of speeches made by Chairmen of Hindustan Lever Limited at the annual
general meeting of the company’s shareholders from 1961 to 2009. A tradition of delivering a speech
on the state of the company and its activities at the annual general meeting of shareholders was
started in 1959 by the second Chairman of Hindustan Lever, S H Turner. With a decidedly
introspective tone, these annual documents interpreted the company’s past on an ongoing basis while
envisioning its future. The public availability, uniformity and regularity of production of these
speeches made them particularly suitable for our purposes.
Our data comprised 49 speeches delivered at successive annual general meetings of
shareholders by 9 consecutive Chairmen of Hindustan Lever. This corresponded to 416 pages of
transcripts and 213,192 words. The average number of pages per speech transcript was 8.5 pages and
the average number of words was 4351. In order to develop the context for our narrative of identity
evolution at Hindustan Lever, we used three other (supplementary) sources of data – 1. Corporate
histories, 2. Newspaper and newsmagazine databases, and 3. Company press releases, financial
statements and annual reports. Data extracted from these sources were not coded but were utilized to
develop a chronology of the history of Hindustan Lever and to construct a coherent narrative.
As we proposed to develop new theoretical insights out of our data, our analysis followed
procedures for grounded theory development specified by Strauss and Corbin (1990) and Charmaz
(2006) as well as more general prescriptions for the conduct of qualitative research given by Miles
and Huberman (1994).

Research Setting

In 1956, the separate subsidiaries of Unilever in India were consolidated into the newly
formed Hindustan Lever Ltd. (HLL). HLL was listed on the Bombay stock exchange and 10% of the
equity was sold to the Indian public. In 1961, Prakash Tandon became the first Indian Chairman of
HLL. The ‘Indianization’ of the HLL management and the infusion of Indian ownership into the
equity of the company had a definite impact on the aims and objectives of the subsidiary
management. Lord Cole, Chairman of Unilever Ltd. during 1961 – 1970, remarked: “There is no
doubt in my mind that the fact of having a public participation has produced in the minds of the top
Indians, not excluding the Chairman, the feeling that they are a public company and as such their
attitude of mind on a number of points is rather different from that of a 100% subsidiary”
(Fieldhouse, 1978: 203).
Lord Cole’s comment points to the possibility of contradictions emerging in the management
task confronted by the HLL management as they sought to reconcile their ongoing responsibilities to
Unilever HQ and their newer responsibilities to Indian shareholders (and the host country at large).
How did these conflicting pressures shape the conceptualization and articulation of the subsidiary’s
identity? How does the evolution of the organizational identity reflect the manner in which the
subsidiary management chose to confront the NR-CR tension? We explore these questions by
examining the changing character of identity claims made by HLL Chairmen over the period from
1961 to 2009.

DISCUSSION

We found that HLL’s Chairmen presented a variety of identity claims over the years
corresponding to five successive identity profiles: a progressive marketing firm (1961-1969), a
consumer-focused self-reliant firm (1969 – 1977), a core sector firm (1977 – 1991), a resilient
consumer-oriented firm (1991 – 1996), and Unilever’s FMCG subsidiary (1996 – 2009). This section
discusses the key points pertaining to the process model emergent from this study of how
multinational subsidiaries utilize the organization’s identity as a navigational device to manage the
NR-CR tension.
In our model, the primary influence on the subsidiary’s identity, as the subsidiary comes into
existence, is the parent corporation’s identity. As Unilever considered itself an ‘oils and fats’
company in the early years and a FMCG company in more recent years, so did HLL. Identity
overhang, therefore, can be understood as the ongoing influence of the dynamic of the parent’s
identity on the evolution of the subsidiary’s identity.
Host country pressures upon the subsidiary, or demands upon the subsidiary for nation
responsiveness, can challenge the identity of the subsidiary by showing it to be inconsistent with
newer expectations from the subsidiary or can cause the subsidiary’s management to reaffirm aspects
of the organizational identity. Host country pressures can originate in either of four sources – host
government regulations, localization of subsidiary management beliefs, competitive pressures, and
normative expectations.
Alongside host country influences, the subsidiary’s identity may also be challenged or
strengthened by pressures emanating from the parent corporation or, more broadly, from within the
MNC network. MNC network pressures on the subsidiary’s identity can originate in either of four
sources – global strategy, organizational structures and processes, intra-MNC competitive pressures,
and personnel transfers.
 The subsidiary management are compelled to interpret, on an ongoing basis, the stimuli
emanating from the twin environments – MNC network and host country – in the form of new
regulations, customer expectations, parent company strategies, intra-MNC recognition (or the lack
thereof), etc. Any of the four sources each of host country pressures or MNC network pressures can
present a challenge to the subsidiary’s understanding of ‘who we are as an organization?’ Subsequent
strategic responses reflect the outcome of the corresponding sensemaking cycle. These responses
lead to identity work, i.e., the active management of the subsidiary’s identity as a means of adjusting
to the changed balance of NR-CR pressures while incorporating justifications for the said strategic
responses into the subsidiary’s identity.

Identity Work

Subsidiaries seeking to adjust to a changed balance of NR-CR pressures can undertake either
of four varieties of identity work to alter the claims corresponding to their hybrid identity. Identity
affirmation happens when a subsidiary responds to an identity challenge by reiterating and
reemphasizing existing identity claims. In doing so, these claims may even be elaborated and
extended. For example, in reiterating the importance of marketing to HLL’s activities and in
developing arguments about the importance of marketing to the availability of reasonably-priced
goods and, in general, to the economic development of the country, HLL’s managers chose identity
affirmation. MNC-identity induction relates to the development of identity claims that enhance the
MNC identity aspect of the subsidiary’s identity. When Unilever adopted a policy to emerge as a
focused FMCG player across the world, HLL’s history was revised (cf. Gioia et al, 2000) so as to
present the company as having a long history of selling FMCG products in the country rather than as
a company with a ‘core sector’ identity. Host country-identity induction refers to the development of
identity claims that enhance the host country identity aspect of the subsidiary’s identity. HLL’s
adoption of self-reliance as a central identity claim in the 1970s and the development of a core sector
identity in the 1980s were examples of host country-identity induction that accounted for
acquiescence to host country demands by enhancing the host country aspect of their identity. Lastly,
Bipartisan-identity induction connotes the development of identity claims that neither enhance the
host country aspect of the subsidiary’s identity nor the MNC aspect. An example was the emergence
of resilience as an identity claim in HLL during the nineties.

Manifest and Latent Identities

Gouldner (1957, 1958) distinguished between manifest and latent social roles and identities.
He observed that, for a given group, manifest social roles and identities are those that are
“consensually regarded as relevant to them in a given setting” while latent social roles and identities
are those that are similarly “defined as “irrelevant, inappropriate to consider, or illegitimate to take
into account” (Gouldner, 1957: 284). Identities other than the one that is most “institutionally
relevant and legitimately mobilizable” for a particular social role may “intrude” into the performance
of that role (Gouldner, 1958: 283). In our model, subsidiaries are able to navigate the NR-CR tension
by transposing their manifest and latent identities in accordance with the shifting demands made
upon them by the MNC organization and by the host country constituents. If the subsidiary’s hybrid
identity has a manifest ‘MNC’ tendency, then the subsidiary’s management can respond to
pronounced host country pressures by making their latent ‘host country’ identity claims manifest and
their ‘MNC’ identity claims latent. On the other hand, if the subsidiary’s hybrid identity has a
manifest ‘host country’ tendency at a time when pressures emanating from the parent corporation or
the MNC network become pronounced, the subsidiary management may respond by making their
‘MNC’ identity claims manifest and ‘host country’ identity claims latent. This is in keeping with
Pratt and Foreman’s (2000: 36) observation that “managers may cope with latent identity conflicts by
making the identities salient.” Since the subsidiary has a hybrid identity with both the host country
and the MNC aspects of their identity being inviolate, incompatible, and indispensable (cf. Albert
and Adams, 2002), our model emphasizes the dynamic interchangeability between these two aspects
of the subsidiary identity.
An examination of the evolution of HLL’s identity claims illustrates the transposition of
manifest and latent identities as a means of managing the NR-CR tension. During 1961 – 1969, the
Unilever heritage was a manifest identity claim for HLL that helped specify who they were as an
organization. Thus, Tandon referred to how the professionalism of management was a strong
tradition in HLL’s ‘parent company’ and one that HLL was taking forward with its own progressive
management in India. However, during 1969 – 1977, as host country pressures for conformity and
for responsiveness to the host country’s needs increased, Rajadhyaksha and Thomas (successors to
Tandon) conceptualized the Unilever affiliation (not heritage) as a latent identity claim that helped
them be ‘self-reliant’ by enabling access to new research on materials and processes that helped
reduce the nation’s import expenditure. In the latest phase of HLL’s identity evolution, host country
pressures eased off as India embarked on an economic liberalization program that imposed far fewer
restrictions on foreign direct investment while Unilever itself ventured on a policy of tightening its
control over its subsidiaries. Consequently, we find that the Unilever affiliation emerged as a
manifest identity claim for HLL.

CONCLUSION

An important implication of our study is with regard to the role of the country manager.
Bartlett and Ghoshal (1992) argued that the country manager has three roles – as a sensor of
opportunities, as a builder of local resources and capabilities, and as a contributor to corporate
strategy making. However, over time, the importance of the country manager seems to have dimmed.
During the nineties, MNCs were observed moving towards a global business unit structure wherein
subsidiaries were virtually broken up into discrete business activities, such as product lines or
functions, which were then commandeered by the parent organization (Birkinshaw, 1995, 2001). The
rise of emerging economies, however, renewed the need for a powerful country manager as
developed economy MNCs sought personnel who could integrate the complex tasks involved in
managing vast, unfamiliar markets (Quelch and Bloom, 1996).
In the contemporary era, where the country manager is gaining renewed respect in the MNC
organization, our study proposes a fourth role for the country manager – subsidiary identity
management. Indeed, it can be argued that this fourth role undergirds the three other roles proposed
by Bartlett and Ghoshal (1992) by shaping the identification of opportunities, by facilitating or
constraining the development of capabilities, and by legitimizing (or delegitimizing) participation by
the country manager in corporate strategy making. While international management scholars widely
acknowledge that characteristics and behavior patterns of emerging economy MNCs can significantly
recast mainstream theory (Ramamurti, 2008), the corresponding potential in the study of emerging
economy subsidiaries of developed economy MNCs has not been recognized.

REFERENCES AVAILABLE FROM THE AUTHORS